Question

Show the forfeiture and reissue entries under the following case:

Alliance Ltd. forfeited 2,000 shares of ₹ 10 each for non-payment of final call of ₹ 2 per share. These forfeited shares were reissued for ₹ 10 each as ₹ 7 paid-up.

Answer 1

Journal Entries
Date	Particulars	L.F.	Dr. (₹)	Cr. (₹)
1.	Share Capital A/c   ...Dr.		20,000
	To Shares Final Call A/c			4,000
	To Forfeited Shares A/c			16,000
	(2,000 shares forfeited for non-payment of Final Call of ₹ 2 per share)
2.	Bank A/c   ...Dr.		20,000
	To Share Capital A/c			14,000
	To Securities Premium A/c			6,000
	(2,000 forfeited shares reissued for ₹ 10 each as ₹ 7 paid-up)
4.	Forfeited Shares A/c   ...Dr.		16,000
	To Capital Reserve A/c			16,000
	(Profit on reissue transferred to Capital Reserve)

Working Note:

2,000 shares of ₹ 10 each were forfeited for non-payment of Final Call of ₹ 2 per share.

Amount called-up:

2,000 × ₹ 10 = ₹ 20,000

Final Call unpaid:

2,000 × ₹ 2 = ₹ 4,000

Amount already received and forfeited:

2,000 × (₹ 10 − ₹ 2) = 2,000 × ₹ 8 = ₹ 16,000

Shares are reissued for ₹ 10 each as ₹ 7 paid-up.

Cash received:

2,000 × ₹ 10 = ₹ 20,000

Share Capital credited:

2,000 × ₹ 7 = ₹ 14,000

Securities Premium:

₹ 20,000 − ₹ 14,000 = ₹ 6,000

Since there is no loss on reissue, the entire forfeited amount is transferred to Capital Reserve:

₹ 16,000​